The morning news. [volume] (Savannah, Ga.) 1887-1900, 1887-05-29
JAY eou1p.s LITTLE SCHEME.
A Lawyer Explains Gould's Transac
tiCn With the Kansas Pacific.

n lawyer Explains S1OulQS IrbnSac-
ticn With the Kansas Pacific.
NEW YORK, May 2s.--The Other evening
a group Of bankers and lawyers were con-
.vel'sing at ono Of the leading clubs when
the chat turned upon the testimony of Jay
Gould before the Pacific Rail ,7ay Commits
sion. One Of the men present asked Mr..
Edward l.. Andrews, the prominent rail-
road lawyer of this city, to explain the
transaction of Gould connected with the
Kansas Pacific Trust, which has been the
| subject Of SO much recent comment.
Mr. Andrews narrative was as powerful.
conclusive and clear an account of this
remarkable business as have vet heard
Il am not surprised that you We not under
| stood it, he said. 1t is almost Incredible.
The Government Commission has unearthed
the facts and circumstances Of Gould's
attack upon trust. This security has
| always been regarded even by the most
Inscriptions corporate manipulators as
something too sacred to be tempered with.
But Gould was not restrained by these
trifles, as the proofs and confessions dragged
out by the Government officers have
shown. The Kansas Pacific Railway
Company owned S3,000,000 of the capital
| stock of connecting road known as the
Denver Pacific railway. The Kansas
Company, wishing to raise money, prepared
to issue bonds and, in order to secure tho
purchasers of its bonds, 1t placed this Den
yer Pacific stock, together with other assets,
in the hands of Jay Gould and Russell Sage,
as trustees for the bondhoders This
security was evidenced by the Kansas Pacific
consolidated mortage, executed on May |.
1879, and, by its terms, the Denver Pacific
stock was delivered to Gould and Sage, to
hold in trust, for the benefit of the expected
owners of 10000, 600 of bonds. So ends the
first scene of this financial drama.
six months elapse and we come to
January, 1880. More than S., 100000 of the
consolidated bonds had been sold when the
scheme was inaugurated. Besides being a
trustee of the mortgage, Gould was the con-
trolling stakeholder Of the Kansas Pacific
Company. The plan was conceived to con-
solidate the stocks of the Union Pacific and
Kansas Pacific, with the valuable franchises
of the Denver Pacific. As the two former
stocks were worth between 80 and par,
the effect of such consolidation would be to
increase the value of the Denver Pacific to the
same level. But 100000 out of the 81, 900
600 of the entire Denver Pacific capital
stock belonged to the Trust for the Kansas
Pacific bondholders. Jay Could as their
trustee, was bound to defend their trust,
and to secure every benefit attainabe for it.
But instead of performing this legal and
moral duty, Gould so managed that the
Denver Pacific stock disappeared entirely
from the Trust 1t was exchanged for
Union Pacific railway stock, and was worth
S3,000,000. But neither that stock nor its
proceeds, nor anything else, was placed i'll
the Trust. The bone was picked entirely
dry; the bondholders were denuded of their
security"
But who got the $1,000 DOOR, asked oneof
the listeners.
This is the story of the conspiracy as
told under oath: The consolidation of the
stocks was arranged on Jan. 10, 1880, and
its terms We're virtually dictated by Gould.
In addition Gould made a contract with the
Kansas Pacific Company by which he Gould
was to become the owner of the $3,0O0,000
of Denver Pacific stock or its proceeds"
This remarkable result was accomplished
in q manner peculiar to Jay Gould. On Jan.
II, 1880, Sidney Dillon wrote a letter TO
Trustees Gould and Sage, making modest
request. He said that the Kansas Pacific
Company would like 10 have the Denver
Pacific stock out of the Trust; that it was of
little or no value to the bondholderS, but
that the company could make use Of it in
certain Ways that would be valuable.
Trustees Gould and Sage replied with re-
markable promptitude to President Dillon
on the same day, stating that they would be
glad to comply with his request, but that
they had some doubt as to their strict legal
right so to do. However, they referred
Friend Dillon to their attorney, and said
there would be no trouble. On the very day
of the correspondence the Kansas Pacific
Company through its principal stakeholder,
Jay Gould, sued this same Jay Gould as
Trustee of the consolidated mortage. 1t
was rather difficult to see how Gould could
have lost anything by this little arrange
ment. The result was that the trustees
were authorized" to hand over the bond
holders property. On Jan. % this absurd
and farcical proceeding terminated The
ink was hardly dry on the monumental
record when the articles of consolidation
were signed. Within twenty-four hours
the Denver Pacific stock was taken out of
the safe and transferred almost entirely to
Jay Gould.
1t was a remarkable steal No wonder
the world is talking about it. have it on
the very best authority that Gonld was in
constant rehearsal with his personal counsel
for three weeks preparing his testimony in
the Pacific railroad investigation. That the
testimony was artful was proved by the
failure Of all attempes to break it. Gonld
was frightened this time. Stealing trust
funds is serious offense even for a man
worth a S100,000,000 That he realized it
was plain from the day he went to the stand,
for his nervousness was pronounced and pain
full BLAKELY HALL,